The unemployment rate in the UK has dropped to 3.8%, the lowest level since 1975.
Despite three years of Brexit uncertainty, employers have continued to hire over the three months to October according to the latest ONS figures.
Looking at it a different way, the national employment rate is now at its highest level since records began in 1971, with 32.8 million people aged sixteen years and over in employment, which is 309,000 more than a year earlier.
This is welcome news for Boris Johnson’s new “People’s Government”, which had been basking in the glories of an election victory, only to wake up to a nasty hangover yesterday. Markets reacted negatively to the Prime Minister’s indication that the Withdrawal Agreement - which MPs will vote through parliament this week - will rule out an extension to the Brexit implementation period due to expire at the end of 2020.
Unsurprisingly, Chancellor Sajid Javid was quick to point out these figures were not a southern phenomenon. Keen to appease the “Tees-side Tories” and the other newly-converted Conservative constituencies, he said, “There’s talent up and down this country - three quarters of employment growth in the last year has been outside London and the South East”.
Looking further into the data, annual wage growth, excluding bonuses, remained solid, slowing slightly to 3.5% in the three months to October, compared to 3.6% in the three months to September.
So, it appears employers are not having to increase wages yet to lure the right candidates in a potentially decreasing talent pool.
Away from Westminster, a few miles up the road in Threadneedle Street, the Bank of England will be closely monitoring this data ahead of its monetary policy committee meeting tomorrow. Keeping inflation under control is the bank’s main priority and a strong labour market, perhaps feeling more confident to spend a little more this Christmas, could mean a rise in prices.
If inflation does start to tick upwards the bank will be under less pressure to cut interest rates, as we enter a tricky year in which the UK navigates its way out of the EU, with or without a favourable trade deal.
We learned earlier this week that if the Government fails to negotiate an acceptable free trade deal in the 11 months from departure date at the end of January we will start to trade with Europe on unfavourable World Trade Organisation rules - a concept that scares many in industry and commerce.
The Bank of England will be very much aware of this as it seeks to balance the economy through the transition period. With interest rates already at record lows, its armoury is quite limited should it need to step in to address a flagging post-Brexit economy with further rate cuts.
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